Call for FRC head Bill Edge to reveal PwC payment details

The Chartered Accountants professional body has thrown its support behind member and former PwC partner Bill Edge over his leadership of the government's audit quality advisory body while he also receives ongoing payments from the firm.

"Mr Edge has been thorough and impartial in discharging the obligations of his role as Chair of the FRC, he has taken leadership of issues that have arisen and has continued to be a passionate and valuable leader of the accounting profession," said Simon Grant, a CA ANZ executive.

Financial Reporting Council chairman and former PwC partner Bill Edge receives a "fixed amount" from the big four consulting firm as part of its partner retirement plan. Paul Jones

"It is in the public interest that the FRC continues to be able to attract people of his character, experience and stature."

But Ian Gow, a professor in the University of Melbourne's Centre for Corporate Governance and Regulation, said Mr Edge should publicly reveal the details of the PwC payments.

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"I think this is clearly a case where [Mr] Edge needs to be more forthcoming about the terms of his retirement package," said Professor Gow, also co-author of a critical look at the firms, The Big Four.

"I think this is a case where the quantum needs to be disclosed to ensure that there is no appearance of conflict of interest."

Professor Gow said the perception of conflict of interest was "exacerbated by the fact that the FRC advises on audit quality, a core function of the big four, given their central role in auditing large firms and ongoing concerns about the quality of what they're doing."

Accounting academic Amanda White of the University of Technology Sydney suggested potential "remedies" to the issue that all involved greater disclosure.

"What are the options for remedy in this situation?" she asked. "Public disclosure of interests by those holding such positions? Greater transparency in the findings of ASIC inspection reports?"

She said the disclosures would help her evaluate if the payments would cause a conflict of interest.

"If you apply the auditor independence framework, the potential issue comes from the possibility that payments create a self-interest threat," Dr White said.

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"However, that cannot be addressed until further information has been obtained. My understanding is that the payment is a fixed amount that is not a superannuation defined benefit – but would that amount change if the audit practice was hived off into a separate entity?

Amanda White, University of Technology Sydney, has suggested "remedies" for the issue which all involve greater disclosure. Supplied

"Another question is the materiality, to use an accounting term, or size of the payment – could the payment be large enough that Mr Edge may subconsciously make decisions that would ensure that payment continues?"

Mr Edge has said the payment was a fixed amount based on a "pre-determined calculation" and asserted there is no link between his retirement payment and the financial performance of the firm.

But the payments are understood to come out of the firm's ongoing operations, meaning there remains a financial link between the firm and Mr Edge.

PwC has the largest auditing practice of any of the big four. The firm's auditing work generated $409 million, or 17 per cent of its total revenue of $2.35 billion, last financial year.

Professor Ian Gow, University of Melbourne, thinks Mr Edge should disclose details of the payments.

The council he heads advises the government on issues that could impact his former firm, around audit quality and the effectiveness of the financial reporting framework in Australia.

When the ongoing payments were first revealed last week, Assistant Treasurer Robert said Mr Edge had declared the income to the government and that it was "not relevant" in any case.